SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1997; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___________________
to _______________________.
Commission File Number 0-18754
BLACK WARRIOR WIRELINE CORP.
- - --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 11-2904094
- - ---------------------------------- ---------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3748 HIGHWAY 45 NORTH, COLUMBUS, MISSISSIPPI 39701
-------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(601) 329-1047
-----------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer (1) has filed all Reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
proceeding 12 months (or for such shorter period that the Issuer was required to
file such Reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at
May 13, 1997
- - ----------------------- ---------------------------
COMMON STOCK, PAR VALUE 2,185,216 SHARES
$.0005 PER SHARE
Transitional Small Business Disclosure Format
YES NO X
<PAGE>
BLACK WARRIOR WIRELINE CORP.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I -- FINANCIAL INFORMATION
Page
----------
Item 1 Financial Statements
Consolidated Balance Sheets -- March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations --
Three Months Ended March 31, 1997 and
March 31,1996 4
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1997 and
March 31, 1996 5
Notes to Financial Statements --
Three Months Ended March 31, 1997 and
March 31, 1996 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II -- OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 725,344 $ 727,454
Accounts receivable, less allowance for
doubtful accounts of $136,959 and $136,959
at March 31, 1997 and December 31, 1996,
respectively 1,159,735 1,369,306
Inventories 218,887 183,467
Prepaid expenses 64,680 53,424
Deferred tax asset 138,071 138,071
Federal income tax receivable 0 14,636
Other receivables 0 0
----------- -----------
Total current assets 2,306,717 2,486,358
Land and Building, held for sale 400,000 400,000
Property, plant & equipment, less accumulated
depreciation of $3,855,110 and $3,729,370 at
March 31, 1997 and December 31, 1996,
respectively 2,589,181 2,194,591
Goodwill, less amortization of $2,243 at March 31, 1997 222,061 224,305
Other assets 5,420 5,420
----------- -----------
Total assets $ 5,523,379 $ 5,310,674
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 934,213 $ 808,832
Accounts payable, related party 6,090 89,733
Accrued salaries and vacation pay 56,956 25,085
Income tax payable 798 52,548
Accrued interest payable 0 29,530
Other accrued expenses 319,598 381,396
Mortgage note payable, related party 150,000 150,000
Notes payable to bank 60,298 18,272
Current maturities of long-term debt and
Capital lease obligations 349,723 307,806
----------- -----------
Total current liabilities 1,877,676 1,863,202
Deferred tax liability 214,355 214,355
Note payable to bank, less current maturities 79,696 31,486
Mortgage payable, related party 230,000 230,000
Long-term debt and capital lease obligations,
less current maturities 829,959 713,873
----------- -----------
Total liabilities 3,231,686 3,052,916
Common stock, par value $.0005 per share,
50,000,000 shares authorized, 2,185,216
shares issued 1,093 1,093
Additional paid-in capital 5,133,087 5,133,087
Accumulated deficit (2,259,094) (2,293,029)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
----------- -----------
Total stockholders' equity 2,291,693 2,257,758
----------- -----------
Total liabilities and stockholders' deficit $ 5,523,379 $ 5,310,674
=========== ===========
</TABLE>
3
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996
---------------------------
Net revenues $ 2,165,018 $ 1,534,301
Operating costs and expenses (1,928,943) (1,484,266)
Depreciation and amortization expense (196,027) (143,511)
Operating income (loss) 40,048 (93,476)
Interest expense and amortization
of debt discount and expense (39,759) (101,307)
Other income 33,652 9,818
Net income (loss) before provision
for income taxes 33,941 (184,965)
Provision for income taxes 0 0
Net income (loss) $ 33,941 $ (184,965)
=========== ===========
Earnings (loss) per average of common shares:
Net income $ .01 $ (.25)
Common and common equivalent
shares outstanding 2,185,216 759,052
4
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash provided by operations $ 325,969 $ 30,105
Cash flow from investing activities:
Acquisitions of plant, property, and
equipment (252,573) (250,441)
Proceeds from sale of plant, property,
and equipment 29,448 6,500
------------ -----------
Cash used in investing activities (223,125) (243,941)
Cash flow from financing activities:
Principal payments on debt
and lease obligations and net
change in notes payable (104,954) 123,437
------------ -----------
Cash (used in)provided by financing activities (104,954) 123,437
Net decrease in cash and cash
equivalents (2,110) (90,399)
Cash and cash equivalents, beginning of year 727,454 284,825
Cash and cash equivalents, end of year $ 725,344 $ 194,426
============ ===========
Supplemental disclosure of cash flow information:
Interest paid $ 37,759 $ 21,747
Supplemental schedule of noncash investing and financing:
Acquisition of plant, property and equipment financed under
capital leases and notes payable 353,192
</TABLE>
5
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. and subsidiaries
(the "Company"). Such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. The
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996 should be read in conjunction with this document.
2. RECENT DEBT RESTRUCTURING
In November 1995, the Company executed Reorganization Agreements with
the holders of an aggregate of $1,922,130 principal amount of
outstanding debentures and indebtedness pursuant to which the
debentures and indebtedness were agreed to be exchanged for an
aggregate of 961,065 shares of the Company's Common Stock. In addition,
pursuant to such agreements, Common Stock Purchase Warrants of the
Company were to be exchanged with the debenture holders for two new
classes of Common Stock Purchase Warrants. Each class of new warrants
was to represent the right to purchase an aggregate of 183,750 shares
of Common Stock. The Class A warrants were to be exercisable at $3.00
per share for a period of four (4) years and the Class B warrants were
to be exercisable at prices increasing in annual increments over the
first three (3) years after issuance from $3.00 per share to $5.00 per
share and were to expire five (5) years after issuance. Through March
31, 1996, an aggregate of $1,353,380 principal amount of debentures and
indebtedness was exchanged for 648,151 shares of Common Stock and the
remaining $568,750 of debentures to be exchanged pursuant to the
agreements executed in November 1995 was subject to the fulfillment of
certain closing conditions. Issuance of the warrants was not completed
in 1995. In September and October, 1996 the holders of an additional
$800,000 principal amount of Debentures executed Reorganization
Agreements and the Reorganization Agreements entered into in November
1995 were amended so as to provide that in lieu of the issuance of the
Class A warrants, an aggregate of 101,250 shares of Common Stock would
be issued and the exercise price of the Class B warrants would be
reduced to $2.00 per share throughout the five-year term of such
warrants. During 1996, $1,368,750 principal amount of indebtedness was
exchanged for an aggregate of 712,914 shares of Common Stock and an
aggregate of 303,750 Class B warrants were issued. In addition, an
aggregate of 101,250 shares of Common Stock were issued in exchange for
the Company's obligation to issue the Class A warrants. Pursuant to all
such agreements, an aggregate of $2,071,357 of accrued interest and
penalties were waived by the debenture holders.
In connection with the foregoing restructuring, the Company effected a
1-for-200 reverse stock split on October 30,1995.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS
INDUSTRY OVERVIEW AND ECONOMIC FACTORS IMPACTING COMPANY OPERATIONS
The level of activity and profitability experienced by the Company is
directly related to the demand for the Company's services by the
domestic oil and gas industry. The market price of oil and natural gas
is the principal factor driving this demand. In recent years, there
have been some periods of relative price stability but only isolated
areas of real growth. In 1996, however, most of the industry
experienced some growth in demand and pricing. Management of the
Company believes that the continuing stability of domestic oil prices
and relatively high gas prices should help continue this trend in 1997.
Increased demand for the services provided by the Company and its
competitors coupled with a general consolidation in the service sector
has reduced downward pressure on pricing. This has led to a reduction
in "predatory" pricing used by some companies to increase market share
and helped improve overall margins. The Company believes that further
improvements in pricing will be seen in 1997 as this trend continues.
The Company plans to continue its marketing policy which stresses the
safety, reliability, technological advantage and overall quality of its
services. Management believes that an increasing number of customers
consider these factors foremost in their selection criteria for a
service company.
The Company intends, as and if opportunities arise, to aggressively
seek to expand its wireline and other service areas through the
acquisition of other oil and gas service companies that meet its
strategic goals. The Company will continue to re-deploy its assets to
areas that are most beneficial to the long-term growth of the Company.
On January 27, 1997 the Company entered into a letter of intent to
acquire the outstanding stock of Production Well Services Co., which
provides wireline services in southern Mississippi Slat Dome Basin.
This transaction is to be completed during the second quarter of 1997.
In addition, the Company entered into a letter of intent on April 1,
1997 to acquire all of the outstanding stock of Petro-Log, Inc., which
provides wireline services in the state of Wyoming, Montana, and South
Dakota. The letter of intent provided that the transaction is to be
completed in the second quarter of 1997. The Company is currently
engaged in negotiations to raise the capital necessary to pay the cash
portion of the purchase price for these acquisitions. The completion of
these acquisitions is subject to raising additional capital.
The Company is actively seeking to expand its directional drilling
services by providing downhole steering tools in addition to hoisting
services. Directional drilling entails entering a production zone
horizontally, using specialized drilling equipment, which expands the
area of interface of hydrocarbons and thereby greatly enhancing
recoverability. This area of business is intended to enable the Company
to enlarge its customer base by providing steering services to other
drilling contractors which do not have "in house" steering tools.
Another area which the Company intends to expand is
7
<PAGE>
tubing conveyed perforating. The Company is providing this service in
Alabama and Mississippi and plans to expand this service throughout its
operational areas.
The Company has purchased state of the art downhole tools including a
segmented bond and magnetic and 40-arm casing inspection tools. This
acquisition will enable the Company to provide services unavailable
from other smaller wireline company competitors and thereby enable the
Company to provide services in a less price competitive environment.
RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE
MONTHS ENDED MARCH 31, 1996
The Company had a net income of $33,941 for the first quarter of 1997
as compared with a net loss of $184,965 for the same period of 1996.
The net income of $33,941 can be attributed to improved margins on
wireline and completion services and an overall increase in revenues.
There was a reduction in interest expense. This reduction is a direct
result of the debt to equity conversion completed in the last quarter
of 1996. The overall improvement was partially reduced by increased
depreciation expense, amortization and income tax expense. Management
believes that revenues from it's Dyna Jet acquisition will increase in
the second quarter of 1997 due to the seasonal nature of this
operation.
Net revenues increased by $630,717 to $2,165,018 for the first quarter
of 1997 compared with net revenues of $1,534,301 in the same period in
1996. While completion services and sales and rentals of tools and
packers remained fairly stable, there was a substantial increase in
wireline services. A large portion of this increase stems from revenues
in the Permian Basin. The major project initiated by a large customer
that began in the third quarter of 1996 is expected to continue through
1997. The Company supplies all wireline services for this project.
There is an expected increase in demand from most of the Company's
customers in the Permian Basin during 1997. Revenues by division for
the quarters ended March 31, 1997 and March 31, 1996 are summarized
below:
8
<PAGE>
THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
---------- ----------
Wireline services
(logging, directional
services, perforating) $1,675,522 $1,062,448
Completion (workover
services) $ 395,876 $ 382,578
Tools and Packers $ 93,620 $ 89,275
(sales and rentals of
bridge plugs)
---------- ----------
Total $2,165,018 $1,534,301
========== ==========
Operating costs and expenses increased by $444,677 in the first quarter
of 1997 as compared with the same period in 1996. This increase was due
to increased costs for supplies and materials from vendors,
attributable to the increase in revenues and in the amount of materials
and supplies purchased for each particular job. The Company experienced
startup costs in its Wyoming operation during the first quarter of
1997. Salaries increased $142,582 for the first three months of 1997
with the total number of employees increasing to 112 at March 31, 1997
from 92 at March 31, 1996. This increase was due to salary raises for
existing employees and the addition of new personnel added to meet the
increased work load.
Interest expense decreased by $61,548 in the first quarter of 1997 as
compared with the same period in 1996. Three to five year notes were
used to purchase new vehicles and equipment during the first three
months of 1997. An aggregate of $104,954 of principal amount at March
31, 1997 went to reduce notes payable. New note payables acquired this
quarter totaled $353,192. Interest on the debt ranged from prime (9.50%
as of April 25, 1997) to 12.00%. The decrease in interest expense is
directly related to the exchange of debentures and notes payable to
Company's related parties to equity during the last quarter of 1995 and
during the last quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by the Company's operating activities was $325,969 for
the three months ended March 31, 1997 as compared with $771,462 for the
period ended December 31, 1996. Investing activities of the Company
used cash of $252,573 during the period ended
9
<PAGE>
March 31, 1997 for the acquisitions of property, plant , and equipment
and another business offset by proceeds from the sale of fixed assets
of $29,448. Financing activities used cash of $104,954 to pay principal
payments of long-term notes and capital lease obligations. Other uses
of cash consisted of purchasing tools and supplies rather than
purchasing them on credit.
On January 27, 1997 the Company entered into a letter of intent to
acquire the outstanding stock of Production Well Services Co., which
provides wireline services in southern Mississippi Slat Dome Basin.
This transaction is to be completed during the second quarter of 1997.
In addition, the Company entered into a letter of intent on April 1,
1997 to acquire all of the outstanding stock o Petro-Log, Inc., which
provides wireline services in the state of Wyoming, Montana, and South
Dakota. The letter of intent provided that the transaction is to be
completed in the second quarter of 1997. The Company is currently
engaged in negotiations to raise the capital necessary to pay the cash
portion of the purchase price for these acquisitions. The completion of
these acquisitions is subject to raising additional capital.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the financial Accounting Standards Board issued
Statement of financial Accounting Standards No. 128, Earnings Per share
(SFAS 128). SFAS 128 supersedes existing generally accepted accounting
principles relative to the calculation of earnings per share, is
effective for years ending after December 15, 1997 and requires
restatement of all prior period earnings per share information upon
adoption. Generally, SFAS 128 requires a calculation of basic earnings
per share, which takes into consideration income (loss) available to
common shareholders and the weighted average of common shares
outstanding. SFAS 128 also requires the calculation of a diluted
earnings per share, which takes into effect the impact of all
additional common shares that would have been outstanding if all
dilutive potential common shares relating to options, warrants, and
convertible securities had been issued, as long as their effect of
dilutive, with a related adjustment of income available for common
shareholders, as appropriate. SFAS 128 requires dual presentation of
basic and diluted earnings per share on the face of the statement of
operation and requires a reconciliation of the numerator and
denominator of the basic earnings per share computation. The company
does not expect the effect of its adoption of SFAS 128 to be material.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
10
<PAGE>
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K
during the quarter for which this Quarterly Report on
Form 10-QSB is filed.
No other Items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-QSB.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
---------------------------------------
(Registrant)
Date: May 13th, 1997 /s/ William L. Jenkins
---------------------------------------
William L. Jenkins
President and Chief Operating Officer
(Principal Executive, Financial and
Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 725,344
<SECURITIES> 0
<RECEIVABLES> 1,296,694
<ALLOWANCES> (136,959)
<INVENTORY> 218,887
<CURRENT-ASSETS> 2,306,717
<PP&E> 6,444,291
<DEPRECIATION> (3,855,110)
<TOTAL-ASSETS> 5,523,379
<CURRENT-LIABILITIES> 1,877,676
<BONDS> 0
0
0
<COMMON> 1,093
<OTHER-SE> (583,393)
<TOTAL-LIABILITY-AND-EQUITY> 5,523,379
<SALES> 2,165,018
<TOTAL-REVENUES> 2,165,018
<CGS> 0
<TOTAL-COSTS> 2,216,479
<OTHER-EXPENSES> 1,928,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,759
<INCOME-PRETAX> 33,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 33,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,941
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
